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Euroland Foods SA Circumstance Analysis Fund I

Fund

I. Advantages

Euroland Foods Company was obviously a publicly traded company since lates 1970s. Theo Verdin founded the business in the year of 1924 as a result in developing his dairy business.

Euroland Food Company found itself as a multinational manufacturer. The several products had been high-quality goodies, yogurt, bottled water, and fruit juices. Each item accounted for 60 per cent, 20%, 10%, and 10% of the company’s revenue respectively. The company’s hq was in Brussels, Belgium. Since the day the business was founded, it includes experienced steadily development.

2. Background of Firm

The board of directors of Euroland Food Company experienced 12members. 3 of them had been the Verdin family, 4 of them were from the managing, and the remaining five users came from outdoors. The combined Verdin relatives, the put together company exec, Venus Property Management, and Banque i Bruges ou des Compensates Bas had been the 4 biggest stockholders. Each experienced 20%, 10%, 12%, and 9% of the company’s stocks outstanding respectively. Senior Management Committee was responsible for the administrative centre budgeting and presenting it to the plank of administrators every year. Eight members, including five managing directors, one particular PDG, and one financial director, had been on the committee.

III. Statement of Situation

Euroland Food Company had two significant problems assessing with its colleagues. One was the high debt-to-equity ratio, another one was the low price-to-earnings proportion. The debt-to-equity ratio was 125%, which usually made the Banque ni Bruges, Euroland’s bank, wasn’t able to keep quiet. Banque man Bruges highly pushed a debt lowering program to Euroland. Zero project could be financed if the leverage level was over and above the current debt-to-equity ratio.

The low the price-to-earnings ratio, the low the stock price was. In this case, the Euroland’s share price was lower than normal of colleagues. At the current ratio 18, Euroland’s their market value was below its book value. Euroland Foods Company failed inside the trying of new product launch. Its sales had been stopped since 98. The lender, Banque man Bruges, was worrying about the Euroland’s capacity to pay the debt backside. The one of the biggest stockholder, Venus Property Management, was worrying about removing the payouts.

IV. Limitations on Answer

Due to the excessive debt-to-equity percentage, the plank of administrators decided to limit capital spending to EUR 120 , 000, 000. There were 9 projects on the table, and up to total EUR 316 million. There is estimated lowest acceptable IRR and maximum acceptable payback years. (Table 1)

V. Possible Solutions

In order to boost the sales, Euroland Company must choose assignments wisely underneath the EUR one hundred twenty million budget limitation, lowest IRR constraint, and optimum payback period limitation. Net present value, internal rate of returning, and payback period are definitely the main actions Euroland Company used to assess each task. According to indicate 3, job 1 replacement unit and expansion of the vehicle fleet, task 2 a brand new plant, project 3 expansion of a flower, project 5 development and roll-out of snack foods, and project 5plant automation and conveyor devices are taken away for the over maximum acceptable repayment period.

The left jobs are all extensive. The particular project in cases like this is the effluent-water treatment in four vegetation. Because it is one of the safety or perhaps environments category, there is no dimension yet. Euroland Company may see it being a future expenditure, and if Leyden was proper, we can dedicate EUR six million today instead of EUR 15 mil four yr later. This project will save Euroland a whole lot in the future. (the saving quantity equals to the net present value of EUR 15 million minus EUR 6 million) The project is going to be required four year later.

MIRE. Recommended Answer

If I was on the plank of owners, I would accept project 10, Acquisition of a leading schnapps company and linked facilities, which is analyzed while project twelve on the Display 3, project 7, Market expansion southward, which is examined as project 6 around the exhibit several, and task 9, Expansion and intro of new synthetically sweetened fat free yogurt and your favorite ice cream, which is examined as project 8 within the exhibit several. The capital budget for the three assignments are EUR 60 mil, EUR 30 million, and EUR twenty seven million correspondingly, which give to us the total EUR 117 , 000, 000. We still have EUR several million are able to use, and I can propose to use it inside the effluent-water treatment at several plants project.

Although the job estimated cost is EUR six million, companies barely pay such a huge number in one day. We can discuss with the vendor to come up a payment plan, additionally we need to help to make a deal that this first repayment is not greater than EUR 3 mil. Project six market expansions southward and project 8 market expansions eastward are similar, but I decided to approve project marketplace expansions southward instead. Besides the higher net present benefit and internal of charge of go back, the purchasing power can be stronger and competition is much less intense.

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